The Effect of Trade Openness on Carbon Dioxide Emission in Taiwan: A Quantile Mediation Analysis

Abstract

This paper adopts an innovative method, called a quantile mediation analysis, which combines a quantile regression and mediation analysis to examine the impact of trade openness on carbon dioxide emission whether through economic growth or not from 1990 to 2018 in Taiwan. The result of the traditional ordinary least square approach shows that Taiwan’s trade openness affects carbon dioxide emission through the full mediation effect of economic growth for the period of 1990-2018 and there is no direct relation between trade openness and carbon dioxide emission. Moreover, the results of this innovative analysis indicate that Taiwan’s trade openness also affects carbon dioxide emission through the full mediation effect of economic growth at any distribution of carbon dioxide emission, and there is no direct effect from trade openness to carbon dioxide emission. This result indicates that trade openness only exists an indirect effect through economic growth in Taiwan. This finding supports Antweiler, Copeland and Taylor’s point of view [1].